Shariah Meets Sustainability: The Rise of Green Sukuk in Pakistan
In line with recent economic developments, Pakistan launched a new financial initiative in May 2025: the Green Sukuk Bond. Issued in accordance with Islamic Shariah principles, this bond aims to attract both national and international investments to fund environmentally sustainable projects across the country. Unlike traditional bonds, the Green Sukuk is interest-free and operates on profit-sharing and contract-based mechanisms, aligning Islamic finance with modern sustainability goals.
To operationalize this, the Government of Pakistan introduced the Sukuk through the Pakistan Stock Exchange (PSX), targeting a total of Rs52 billion. The initial offering, valued between Rs20 and Rs30 billion, was launched under the Sustainable Investment Sukuk Framework (Profit, Pakistan Today, April 22, 2025). This framework, approved by the federal cabinet, emphasizes transparency and mandates that all funds be directed solely toward environmentally sustainable projects to foster a greener Pakistan (Dawn News, April 24, 2025).
Moreover, four leading Islamic banks—Meezan Bank Limited, Bank Alfalah Limited, Dubai Islamic Bank Pakistan Limited, and Bank Islami Pakistan Limited—have been designated to facilitate the transactions. This collaboration seeks to fulfill both green economic goals and Shariah compliance (Business Recorder, May 1, 2025). The Green Sukuk will fund three major infrastructure projects that have long awaited completion due to financial constraints.
First among these is the Garuk Dam in Balochistan, located in District Kharan. Originally launched in the early 2000s for water storage and irrigation purposes, the project faced long delays due to escalating costs. Its revised budget now stands at Rs28 billion, with a Rs5 billion shortfall being covered by the Green Sukuk (Profit, Pakistan Today, April 2025). Following this, the Nai Gaj Dam in Dadu, Sindh, a multi-purpose project initiated in 2012 for water storage, flood mitigation, and irrigation, also suffered extensive delays. By 2019, the revised cost had risen to Rs47.7 billion, with a funding gap of approximately Rs22 billion, now partially supported through the Sukuk bond.
In addition to these, the Shagarthang Hydropower Project in Gilgit-Baltistan will also be funded. Located near Skardu, this project aims to generate 26 megawatts of electricity to serve Skardu and its surrounding areas. With a projected cost of Rs25 billion, it intends to expand renewable energy access in the northern region of Pakistan. These three projects have remained pending for years and their completion is critical to achieving economic stability and social progress.
Furthermore, the Green Sukuk program serves as a bridge between Islamic finance and environmentally friendly development, addressing both ecological and financial challenges. It is projected to reduce greenhouse gas emissions by 20 to 30 percent and directly supports Pakistan’s commitments under the Paris Agreement. However, for the full benefits to be realized, certain strategic steps must be taken: enhancing investor education in green financial tools, implementing independent verification and auditing mechanisms to ensure proper fund allocation, and ensuring transparent impact reporting to maintain investor confidence on both national and international levels.
Despite these challenges, the government plans to expand the initiative. Future issuances are expected to include Social Sukuk and Sustainability Sukuk aimed at financing education, electric community transportation, solar energy, low-income housing, and water treatment systems (Daily Times, April 2025).
In conclusion, this marks a significant step not only toward international investment but also toward stabilizing the national economy. The Shariah-compliant bond offers a sustainable financial alternative while addressing key environmental and infrastructural needs. If managed effectively, it could become a foundation for Pakistan’s green economic vision extending through 2028—a hopeful trajectory toward long-term prosperity.
Bushra Noor
The author is a student of BS English at Fatima Jinnah Women University Rawalpindi.
